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What the UK consumer agenda means for digital content providers

What the UK consumer agenda means for digital content providers

Consumer law is undergoing a radical transformation, with both the European Union and the UK government keen to ensure consumers both understand and enforce their rights.

The digital content market is one of the areas under scrutiny. Despite accounting for around £1bn a year in UK consumer sales, much of the market has until recently fallen outside mainstream consumer protection law. In particular, the rights of consumers who download or stream software, games, music or films have been uncertain.

This is now changing. Regulations that came into force last month refer to digital content for the first time. They impose pre-contractual, cancellation and refund obligations on all business-to-consumer contracts - whether concluded online, by email or in-store - and penalties for those who fail to comply. 

A further set of regulations mean that from 1 October, consumers of digital content will be able to bring claims in the civil courts for misleading actions or aggressive practices by businesses. And the Consumer Rights Bill that is currently being considered by Parliament will extend the law on the sale of goods to digital content 

An obligation to provide pre-contract information

Online sellers of digital content need to be alive to changes brought about by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, which came into force on 13 June 2014. Sellers are now obliged to provide consumers with certain pre-contract information relating to the content and the hardware and systems it will work with, as well as its total price and any cancellation rights the consumer has. Sellers must also refund consumers within 14 days of the cancellation of a contract, while pre-ticked boxes that result in extra payments are now banned. 

Consumers will soon be able to seek redress through the courts 

At present, the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs) criminalise misleading and aggressive commercial practices by businesses towards consumers. These can only be enforced by the new Competition and Markets Authority or Trading Standards, but the Consumer Protection (Amendment) Regulations 2014 - which will apply to business and consumer contracts entered into, or payments made, on or after 1 October 2014 - allow consumers to bring a claim in the civil courts. To succeed, consumers must show that the misleading action or aggressive practice was a significant factor in their decision to enter into a contract or make a payment.

The new redress remedies 

The new remedies available to consumers of digital content by way of redress include the right to unwind a contract and receive a full refund, provided certain conditions are met, or the right to a discount on past or future payments due. Consumers are also entitled to seek damages for consequential financial loss or any alarm, distress, physical inconvenience or discomfort caused.

The Consumer Rights Bill and minimum quality standards 

The Bill aims to cut through the complexity of consumer protection law and, in the case of digital content, extend it by introducing it as a new category. It also deals with unfair contract terms and the investigation and enforcement of consumer law, including the introduction of new enhanced consumer measures for a breach of competition law. 

The Bill sets out in one place the minimum quality rights and remedies for consumers in sale of goods, services and digital content contracts. These minimum quality rights and remedies include a requirement that digital content is of satisfactory quality; that it is fit for a particular purpose (including a purpose other than that for which it is usually supplied, provided the consumer makes this purpose known to the seller in any pre-contract discussions); and that it will be 'as described' by the trader (strangely, the Bill provides that if the digital content is modified, it has to remain as initially described for the duration of the contract). 

What these reforms mean for digital content providers.

The changes are far-reaching. Many businesses are now reviewing their online terms and conditions and sales processes in light of the 2013 and 2014 regulations and in anticipation of the Consumer Rights Act, whose impact on the sale and supply of digital content is uncertain.

Greater litigation risk and issues thrown up by these changes

The 2014 regulations increase the risk of litigation and businesses have raised a number of concerns in response. 

And the requirement in the Bill that digital content be fit for a particular purpose could cause problems for online traders where it is sold subject to standard terms and conditions if the consumer notifies the seller by email of their intended purpose and downloads the content before the seller has a chance to respond. The requirement that digital content be of a satisfactory quality is another issue for an industry in which traders often use third-party software in their products that is provided on a 'no warranties' basis. Here, traders will be assuming third-party risk, in addition to their own. 

The digital content market is also characterised by frequent updates and upgrades. The Bill arguably does not adequately reflect this by requiring that digital content remain as initially described, and may make traders less willing to provide them.